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Topic: COVID has driven Americans to bank $1.6 TRILLION in savings - page 2. (Read 319 times)

legendary
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These numbers are not what they seems to be. First of all, if you want to compare the personal savings, then you should compare with the M1 monetary supply on the other side. Right now, it stands at $20 trillion. The figure was less than $4 trillion two years ago. As you can see, the M1 supply has increased by more than 400%, and the personal savings hasn't grown anywhere near that rate. Using inflation rate for comparison can be misleading, because inflation will be gradual and won't be felt in ground for 5-10 years after the excess monetary supply is created.
sr. member
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Smart move actually, they have been to recessions and housing crisis before so they know that if shit hits the fan, they know better to have money protected in inflation. Although I don't like the idea of storing money in banks, I just think that they could've done a better job like at the least putting it in a index fund or stock market.
legendary
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Saving money is smart, despite what the people who have a vested interest in you going in to debt will tell you. Saving it in fiat, however, is dumb. Sure, bitcoin may be volatile, but at least it can go up as well as down, as opposed to fiat which just constantly and steadily devalues.

Clearly, the US managed quite okay during the pandemic if the population could afford to put more into savings during the pandemic than they did before.
Anyway, it is interesting to note that despite the economic effect of the pandemic, Americans still manage to hoard a huge amount excess savings, even reaching $1.6 trillion.
I wouldn't generalize this to all Americans. The ones who were already doing fine have been spending less on eating out, traveling, vacations, etc., and are saving it all instead. The ones who were already struggling are struggling even more. Despite all this increased saving, average household debt in the US is continuing to hit record highs each month.

Modern society in most of the USA and North America pushes consumer debt far too hard
That's because our entire society and indeed economy is built upon debt. Can you imagine how many businesses would fold almost overnight if everyone just stopped buying shit they don't need?

It sure is easy to save when you hand out money like candy.
I'm sure there will be absolutely no long term repercussions from this mass money printing! Roll Eyes
hero member
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I'm not so sure with the US, but I can say that things around here have not yet gone back to normal, or perhaps they won't anymore and what's happening right now is what they call as the new normal.


As a country that prints money freely, I am struck by America's ethic to do this to avoid inflation. isn't this too late to do, but well then never. Saving money and halting circulation broadly allows for a slight increase in deflation. The existence of Covid 19 has brought many economic changes of all kinds, returning as if the crisis had befallen for thousands of years. In fact, we are seeing this being done a lot in other countries. Renewed money management makes America more frugal than it used to be.
legendary
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So technically these sort of savings would cause a deflationary period, because money isn't circulating in the economy anymore. But then the US government chooses to begin printing an undetermined amount of money (at the time), paying people to stay home and issuing out business loans with no hope of them ever being paid back due to Covid restrictions. It sure is easy to save when you hand out money like candy.
hero member
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Certainly another savings glut.

Which is why it makes no sense to hold fiat assets right now in my opinion, there are simply too much liquidity sloshing around everywhere and interest rates are just so low.

Do expect a reversal of this trend in 2022 though as people get out and about, and spending. But that would increase inflationary pressures.
legendary
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I'm not so sure with the US, but I can say that things around here have not yet gone back to normal, or perhaps they won't anymore and what's happening right now is what they call as the new normal.

Saving in cash is not really sound. Perhaps the recommended 3-6 months emergency savings is enough. The rest should be saved in more or less inflation-resistant assets. What those are, it depends.

Anyway, it is interesting to note that despite the economic effect of the pandemic, Americans still manage to hoard a huge amount excess savings, even reaching $1.6 trillion. Down here, the pandemic has exhausted what little savings ordinary people have kept for a long time.
legendary
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Perhaps their reasoning was they don't need any profits, they just need to save their money just to weather the COVID-19 panic and ride out the storm. And once they saw that it isn't so bad after all, they began to pull out their assets before banks can even begin to make use of those savings. But I do agree, they could have gone for other options for their money instead of just keeping it on the banks. Since most people didn't really have a job back then, keeping your assets in bitcoin—which performed dramatically well in 2021—would have been the best option. But it isn't for everybody, I guess.
hero member
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True point that they could have saved their money into something much more profitable. For example, dipped shared with guaranteed up surge for the NIFTY or Fortune 500 companies and her highest returns by the end of this year or may be first quarter of 2022 as the market recovers from dips.

However, its the crisis situation that’s why everyone saved it in the most secure place which savings account in a bank. Fine, you get 4-5% interest in it but it’s safe money and it’s being saved for the crisis situation and it’s not investment money. 

May be that is the reason why it all got stuck in savings bank account.
legendary
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I don't think we are back to normal and I don't think we will soon, we need a lot of time for the economy to fully recover, don't forget that we are talking about the United States of America, which has the strongest economy in the world, if this is the case in the United States what do you think Will it be in the rest of the world? The economy in most countries of the world is like a building based on paper foundations, with any strong wind tremor that will fall (what happened when the mutated Corona virus appeared, gives us a clear indication).
Of course, it would be much better if consumers turned to inflation-protected assets like Bitcoin, but unfortunately so far, the mass adoption of Bitcoin has been weak despite the fact that it has achieved massive growth in the recent period.
hero member
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Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

If people had such kind of awareness they should thrown away their fiat and want the gold or barter system back as the medium of exchange but they never acknowledges their money is losing its value and I don't know how many people understand what is inflation in this world no matter wither its a developed or developing nation.
If that is the case then are we also getting closer to the adoption, or just that bitcoin becoming a hedge to economic and financial woes we've experience since the covid-19 hit us. And maybe yeah, it could be part of the savings have been in bitcoin and then majority of them withdrawing during the peak at around $60k'ish that's why the sudden downturn specially that it happen close to the holidays, (thanks giving, christmas and new year). As for the economy recovering, I doubt that it can recover what we have lost though, it might take years for an ordinary business to recoup what they've lost and some of them even closes their business already.
sr. member
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Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

If people had such kind of awareness they should thrown away their fiat and want the gold or barter system back as the medium of exchange but they never acknowledges their money is losing its value and I don't know how many people understand what is inflation in this world no matter wither its a developed or developing nation.

hero member
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Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?



Just when the world was trying to do a recovery from the covid-19 pandemic, a particular variant which is known as the delta variant appeared and did a little more panic that chased people back into their shell and that caused the already recovery economy back and afterwards the omicron is sweeping the world now. Therefore, I don't thnk the economy did a recovery in 2021 (a year after covid-19 year) , except we are going to watch 2022 outcome.
legendary
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We appear to lack complete savings data for 2021. Charts above indicate massive $1.6 trillion in savings for 2020 followed by a dip.

The author of the piece says "everything recovered in 2021" with consumers having no need to emergency binge save anymore.

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?

It's actually a good thing and long may it continue into the future. Modern society in most of the USA and North America pushes consumer debt far too hard, allowing people to borrow all sorts of things on credit. Saving for a "rainy day" is often looked down on and investing has never been more accessible yet is not pursued by many. Having backup funds can offer great peace in your life instead of spending every cent you get. The general reason for this massive savings glut is fear of job losses but also because many big ticket items have been put off - either because the products are unavailable (like high end electronics consoles due to chip shortages) or people buying new cars as factories were shut down right after Covid. It might be a few years before people start spending again but hopefully some of this savings culture continues longer term as it is a good trait to hold.
legendary
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When stocks were at their lowest value, many people bought food, drink, and rushed to buy toilet paper.
Then, the problems of dismissal of workers appeared, so many of them saved, and because the knowledge of many people about investment is shallow, most of them will keep the money in the form of cash due to the ease of its liquidation, and some may buy, gold, real estate or stocks.
1.6 trillion is a huge sum, so many people may think again if inflation levels continue to increase.


Cryptocurrencies are still far from an option for most people, or at least they will be a timid investment.
legendary
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Putting in savings more than 6 months worth of emergency funds, what a first-world problem. Clearly, the US managed quite okay during the pandemic if the population could afford to put more into savings during the pandemic than they did before. Honestly, I don't get it. If they fear a huge crisis, shouldn't they be hoarding something of actual value, such as essential medications and food? What's the point of having tons of money at a time when there's a lack of products and when money loses value quickly?
Also, if inflation doesn't motivate people to spend fiat under some circumstances, the whole argument that Bitcoin can't work as money because it's deflationary and people won't be motivated to spend it fall apart.
As for the current state of the economy, I think we're in recession, but somehow entering it gradually rather than crashing into it.
legendary
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Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period.

The average person anywhere in the world still believes that fiat is the best option, because in Europe, too, people's savings in banks are increasing. I’m not from a country that is doing well financially, but savings in banks are steadily increasing thanks to hundreds of thousands of people working abroad and sending money home. At a time when we are scared of viruses and when we read every day about supply chain interruptions, most people think that it is better to have fiat on hand in case we need it, than any other asset regardless of inflation.


Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

Volatility is what scares potential investors, even though the price is a little less than $20k higher than a year ago - but the opinion that the bull run is over and that a new crypto winter is coming does not create an optimistic environment for risky investments.

Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?

I don't believe we can talk about normalization in any sense if a pandemic is constantly hanging over our heads, and when I hear how much world politicians scare people with each new strain of the virus I wonder if they want normalization or want to continue to deprive people of their rights and freedoms. Take a new dose of vaccine and everything will be OK, until you need a new dose and so on indefinitely...
hero member
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We appear to lack complete savings data for 2021. Charts above indicate massive $1.6 trillion in savings for 2020 followed by a dip.

The author of the piece says "everything recovered in 2021" with consumers having no need to emergency binge save anymore.

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

I think buying assets which beats inflation and also gives us profits is becoming the new norm these days.
People are becoming more aware these days and are investing into various assets.
There are less number of people these days who would prefer to stack their savings in bank accounts.
Even the fixed deposits are hardly near 5% - 6% which shows how inflation is overtaking savings account interest rates.

Quote
Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?

Of course not. We are definitely not back to normal and I think we will never be.
The simple reason is because the government has rained a lot of money into the economy.
This is creating an inflationary effect and will probably will not be ever recovered.
legendary
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The COVID-19 pandemic has driven Americans to hoard $1.6 trillion in 'excess savings' amidst ongoing fears of an economic crisis, despite the fact that experts are warning that the value of these rainy day funds are being slashed by surging inflation rates.

American households would not have put away the huge sum had the COVID-19 crisis not changed the world over the last two years, according to the Federal Reserve Bank of New York.

The funds are far more than the usual three to six months of emergency savings financial advisors typically recommend.

Saving rates have dipped to 2019 levels following four consecutive quarters of record high amounts of savings due to Americans hoarding their savings, money managers, financial advisers and economists say, according to the Wall Street Journal.

But they forsee more cash stockpiling in the immediate future, with the Omicron variant likely to trigger Americans to save yet more of their cash over fears of possible future chaos.  

To make matters worse, annual inflation rates in the United States have steadily increased since January 2021 and through August 2021, starting at just 1.4 percent in January 2021 all the way to 5 percent in August 2021. It has since surged to 6.1 per cent in October, the most recent figure available, and the highest level since 1990.



This chart shows the percentage of disposable income saved by Americans each month - with the rate spiking close to 35 per cent as COVID hit US shores  



The blue line on this chart from the Bureau of Economic Analysis shows the amount of cash Americans saved - in billions of dollars each month, with a COVID spike in 2020. The red line on the right shows the amount economists think Americans would have saved had it not been for the appearance of the virus  

'I have been one of the more optimistic ones, but with this new variant now on the horizon, I think we're in for more of the same of what we've seen over the last six months,' says Wendy Edelberg, director of the Hamilton Project at the Brookings Institution.

In reality, economists say hoarding one's savings can actually hurt a persons' long-term finances if inflation continues to increase, while causing bigger issues for the economy, of which consumer spending accounts for over two-thirds of its gross domestic product, the Wall Street Journal reports.

America's money hoarding began at the start of the coronavirus pandemic, as the government issued three rounds of stimulus checks to qualified individuals.

As the pandemic nears it's second year, and with no end in sign as the specter of the Omicron variant continues to loom large, Americans, many of whom have been largely housebound since the pandemic's onset, have remained thriftier than ever.

The result has been the highest personal savings rate since World War II thanks in part to rising incomes and a healthy labor market, according to the Journal.

'We see a lot of folks sitting on an incredibly high savings amount, and it's really just a fear factor,' says Nina O’Neal, partner and investment adviser with AIM Advisors.

'In 2021, they kind of felt like, "Things were getting better. We're going to get better from the pandemic," and they did, but also, they didn't. It is sort of like the same sideways winding road from last year, and so I think people started to spend a little bit more but they continue to hold that cash.'

However, there has been a slight uptick in spending in recent months as experts say Americans have started to use more credit cards to spend their money on smaller items, with 27 percent of US consumers saying in October they had applied for a credit card over the last 12 months.

And while credit card balances have remained below pre-pandemic levels, the amount increased $17 billion to $800 billion in the third quarter of 2021, with the same sized increase in the second quarter, according to the Federal Reserve Bank of New York.

Americans between the ages of 40 to 49 and 50 to 59 currently make up the lions share of the credit card debt.

And consumer spending on bigger purchases spiked 2.2 percent in October.  

Charlotte Geletka, managing partner and owner at the financial advisory firm Silver Penny Financial Planning, outlined the disadvantages of hoarding savings, as money in the bank only loses value.

Geletka added that on the other hand, cash affords people flexibility and is easier to access in the event of a personal financial crisis.  

Geletka told the Journal that she recommends her clients to split their funds by putting one portion of their savings in the stock market, while keeping the other liquid, as in cash, for easy access should an emergency arise.

Meanwhile, President Joe Biden recently said reversing rampant inflation is a 'top priority' after cost of living increased to 6.2 percent - its highest level in 31 years.

Last month, Biden announced that Jerome Powell will serve a second term as the Federal Reserve Chair.

https://www.dailymail.co.uk/news/article-10269475/COVID-19-turned-Americans-super-savers-hoard-cash-despite-inflation-threatening-value.html


....


We appear to lack complete savings data for 2021. Charts above indicate massive $1.6 trillion in savings for 2020 followed by a dip.

The author of the piece says "everything recovered in 2021" with consumers having no need to emergency binge save anymore.

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?



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